Asia markets extend rally on central bank hopes

HONG KONG: Asian stocks pushed higher again Monday, building on last week’s rally as central banks around the world promised support to financial markets after Britain’s vote to leave the EU fueled fears of another rout.

The optimism that characterized last week continued as investors tracked another surge in New York and Europe, helped by upbeat US and eurozone data.

However, analysts warned there was still a plenty of headwinds as Britain and European Union leaders must agree a breakaway deal, while the global economy remained fragile.

Sydney rose 0.3 percent in cautious trade after the weekend’s general election produced no clear winner, raising the prospect of a hung parliament.

With votes still being counted, Prime Minister Malcolm Turnbull said the final result might not be known for several days, while economists warned the uncertainty could lead to the country’s top-class AAA rating being cut.

South Korea’s promise of $17 billion in stimulus last week came as dealers speculate that Japan will bolster its own multi-billion-dollar program, while the chances of the US raising interest rates this year have all but evaporated.

On Thursday, Bank of England boss Mark Carney became the latest to provide assurances, indicating policymakers could embark on fresh monetary easing — raising the possibility of a cut in rates.

Richard Jerram, chief economist at Bank of Singapore, said: “Overall the impact of Brexit on the global economy seems likely to be limited, with the pain concentrated on the UK and, to a lesser extent, the rest of the EU.”

But Nicholas Teo, a trading strategist at KGI Fraser Securities in Singapore, told Bloomberg News: “While the potential for increased liquidity from central banks has helped calm stock markets, there’s still a lot of uncertainty out there.

“The strengthening US dollar isn’t good for emerging markets. With China still on a slowdown, US recovery tentative and the messy UK-EU divorce, volatility will remain heightened.”

The pound edged up against the dollar after taking a hammering from the referendum outcome. In early trade it bought $1.3307 against $1.3267 Friday in New York and is well up from the 31-year low $1.3121 touched at the start of last week.